Analysing blockchain patent trends

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24 April 2018

Johan Ståhlberg and Isabel Cantallops Fiol of Valea AB consider developments in the field of blockchain patents, examining the number of blockchain patents applied for and granted in various jurisdictions and fields

These days, it is hard not to read the newspaper without finding an article about blockchain. Since the emergence of blockchain in 2009, there has been an increasing interest in this technology, initially from early adopters, more recently from various companies applying it in different fields, and from investors across the board. As the interest in blockchain grows, so does the number of patent applications and patents in this field. Since blockchain technology may disrupt the operation of businesses in many sectors and areas, patenting of blockchain technology has widespread implications for survival and continued success, e.g. in terms of freedom to operate, exclusivity and licensing opportunities. Here, we look into the current trends in this booming field of technology, and attempt to identify possible future scenarios, as well as currently unexploited technology areas.

Blockchain technology: an explanation

In a nutshell, blockchain is a technology that provides a new way for users in a computer network, such as the internet, to exchange information. Blockchain is considered revolutionary because of its robustness against fraud and its non-dependence on a central coordination entity. Particularly, the robustness is provided by the way information is distributed and maintained by each node in a network of computer nodes, and its security is enabled by its unwavering encryption.

To understand how blockchain works, it may help to start by looking at the term itself. The word blockchain consists of two parts –"block" and "chain". The blockchain is thus, simply put, a chain of blocks. But what actually is a block, and what makes the block form a chain?

The chain can be viewed as a file of data that is structured into difference sections, or blocks. The contents of a block depend on its preceding block. That is why it is called a chain.

Somewhat simplified, each block may be said to include an identifier of the block, a solution to a puzzle, a plurality of transactions and a one-way encryption of the preceding block (called a hash-value in mathematical terms). The puzzle is constructed such that guessing the solution to the puzzle is an alternative that is as efficient as any other more structured methodology for solving the puzzle. The puzzle solving relates to the so-called proof of work, but other alternatives like proof of stake are also commonly used, as so-called consensus criteria.

When a solution to a puzzle has been found, a new block will be created by the solver (the miner). The miner allows the new block to propagate through the computer network, i.e. a peer-to-peer (P2P) network of the blockchain. Each node in the P2P network will then verify the new block and either accept it as valid or reject it as invalid based on the rules of the blockchain.

Blockchain technology is in fact built on a foundation of publicly available technologies, such as P2P and encryption (e.g. hash values). In particular, publicly available technologies like asymmetric encryption (US patent 4,405,829), hash functions (Hans Peter Luhn in 1960s), Merkle trees (US patent 4,309,569), key-value database (Charles Bachman in 1960s), P2P communication protocol (Tom Truscott and Jim Ellis in 1979), and proof of work (Cynthia Dwork and Moni Naor in 1993) provide a foundation for blockchain technology.

Trends

Blockchain technology has been around for almost ten years, but the basic technology was publicly available for several years before that. This means that patents relating to blockchain technology are typically directed towards improvements of the basic blockchain technology, or towards specific applications that make use of the basic blockchain technology. We have looked into the evolution of the patent landscape in blockchain by conducting a search for blockchain-related patent applications and patents. In order to identify the most recent filing and granting trends, we have performed the same search twice, in November of 2017 and in March of 2018.

Based on the results of the searches, filing of patent applications directed towards blockchain technology appears to have started as early as 2007/2008, and the activity in filing of patent applications has grown substantially year-on-year since 2015.

Figure 1 illustrates the number of filings per year, from 2007 onwards, according to the above-mentioned searches. It can be expected that the total number of patent applications for 2016 may end at approximately 900 applications (assuming a constant rate of filings per month). Similarly, it may further be expected that the total number of patent applications for 2017 may end at less than 500. This also assumes a constant rate of filings per month, which seems less likely given the enormous interest in blockchain across multiple business areas. However, this may possibly be a sign that the number of filings is slowing down. For 2017 in particular, but also for 2016, a factor of uncertainty is of course that many applications are not public yet, and those appearing in the search may not be a representative selection on which a conclusion should be drawn.

Figure 1: Number of applications filed per year

All applications filed in 2016 and 2017 are not publicly available.

Figure 2: Number of applications/pantents by country

In terms of the geographical distribution of the filings, the interest in blockchain appears to be global. Here, we identify the jurisdictions in which most efforts have been made to create patent protection for the technical solutions including blockchain technologies.

In terms of individual countries, the US and China have, by far, the greatest number of filings, but a fair portion of the PCT applications (Column WO in figure 2) may be assumed to be pursued in Europe, in addition to the US and China.

A trend in this respect may be that Europe and Canada appear to be picking up speed concerning filing of patent applications, since the increase of filings between the two occasions the search was performed is more than 60% for these regions. At the same time, the US and China only increased by about 40% and roughly 50%, respectively. Notably, filings in South Korea increased by about 54%, which is similar to the increase in the number of filings in China.

From the searches, it can also be concluded that the number of companies (not shown in any figure) that show interest in attempting to patent blockchain technology has increased rapidly. The searches reveal that the number of companies represented in the search results has roughly tripled in only approximately three months. Almost one third of the companies originate in the financial industry, where companies like Bank of America and MasterCard International take the lead. At the very top among the assignees is nChain Holdings, which is linked to M Craig Wright, one of the prominent figures supporting blockchain technology.

In the preceding paragraphs, patent applications and actual granted patents have been considered jointly. In the following, we provide some conclusions and observations concerning granted patents per region and per company.

The data of the searches reveals that US patents are by far the most prevalent, followed by Chinese patents. As shown in figure 3, US granted patents amount to almost 100, while Chinese patents amount to roughly 40. When the increase of granted patents is compared between the two search occasions, it can be concluded that the US, South Korea and Australia appear to outperform China, which has increased by about 25%, while the former countries have increased by about 40%.

Figure 3: Number of granted patents by country

On a per company basis (not illustrated by a figure), the picture looks quite different from what it did when considering both patent applications and granted patents. However, one similarity is that the number of companies represented has increased greatly. Particularly, the number of different companies that have obtained at least one granted patent has more than doubled. A contrast is nevertheless observed concerning which business areas appear to have been more successful in patenting their solutions. While financial institutions seem to be most eager to file patent applications, the well-known names in finance do not appear among the assignees of the granted patents. Instead, a company called Coinplug with 11 granted patents takes the lead before companies like Dell (here a number of Dell companies are grouped together for simplicity) and IBM. Coinplug provides a bitcoin exchange platform, which serves as a simple explanation to its significant activity within blockchain technology for obvious reasons.

According to the overview above, patenting of blockchain technology appears to still be in its initial phase, and many applications are still not public. Therefore, freedom-to-operate analyses (FTO) for blockchain-related solutions are expected to be less reliable than an FTO in a field where the patent landscape is less dynamic, the number of filings is fewer, and the law on subject matter patentability is more permissive.

As a complement to the specific searches summarised above, we have also explored how blockchain is being used in different business areas.

Quite surprisingly, one of the least patented, or sought to be patented, areas relates to the improvement and development of blockchain infrastructure connected to areas such as energy consumption and database management. Another lightly exploited area concerns social content, such as social media, gaming and virtual worlds.

The two largest areas that seem to make use of blockchain are financial transactions and applications. Financial transactions require no further explanation, while applications may be exemplified by supply chain, smart contracts, data storage and biometrics.

Future scenarios

In view of the above, it appears that the quest for patents relating to blockchain technology is far from over. At this stage, various future scenarios are conceivable.

The patent landscape for blockchain technology may transform into that of telecommunications, where new players may be allowed at a fair and reasonable cost (i.e. FRAND agreements). In order for this to come true, it is possible to envisage that some of the apparently leading companies form a joint venture, which may control a larger pool of patents. In addition, in order to enable efficient licensing, international standards for blockchain technology would need to be agreed upon. This scenario may be characterised as less likely, but not impossible.

Another scenario is that companies attempt to exploit blockchain technology while more defensively protecting their proprietary solutions and possibly offer licences to partners or as part of a one-to-one cross-licence agreement. Since this scenario requires less cooperation between large groups of companies, which may operate in different business areas where IP history and approaches vary, this scenario may be more likely.

Final remarks

Depending on a number of factors, such as business area, jurisdictions of interest and willingness to accept risk, a particular market may or may not be said to be blocked by a chain of patents. Based on the observations above, some initial conclusions may be drawn. However, each case will require its own specific study, which takes into account various aspects connected to that area. In particular, financial situation, current market position and acquired pending or granted patents should be taken into account.

Johan has worked with IP since 2004 and joined Valea AB in 2008, where he is a partner. Before entering the IP field, Johan worked with software development, product specification, marketing and sales of consumer electronics. Specifically, Johan has experience of medical devices, LCDs, light emitting diodes, video coding and general software for embedded systems and PCs. Johan has also experience of research and development of lithography systems for silicon wafers.

Isabel Cantallops Fiol

Patent AttorneyUS Patent Agent

Isabel specialises in prosecuting patents in the areas of telecommunications, software, business methods, life sciences and medical devices. Isabel joined Valea AB in June 2012, where she is a partner. Isabel started her career in IP in 2002, first as a technical consultant, and later as a US patent agent at Clifford Chance in New York. During her time in the US, Isabel worked on the drafting and prosecution of patent applications, as well as on US patent litigation. Isabel has experience assisting with invalidity and infringement opinions, due diligence and transactional operations. Prior to joining Valea AB, Isabel also worked as a US patent agent at Baker & Hostetler in New York. Isabel has a master's degree in neurobiology and physiology and a PhD in neuroscience, both from Northwestern University (Illinois, US). She also has five years of postdoctoral research experience in neuroscience (biotechnology) at Cold Spring Harbor Laboratory (New York, US).

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